On February 28, 2018, the ECJ issued its decision in the case C-307/16 (Pieńkowski).
Context: Reference for a preliminary ruling — Directive 2006/112/EC — Value added tax (VAT) — Article 131 — Article 146(1)(b) — Article 147 — Exemptions on exportation — Article 273 — Legislation of a Member State making the benefit of the exemption subject to the attainment of a minimum level of turnover or the conclusion of an agreement with a person authorised to make VAT refunds to travellers
Article in the EU VAT Directive
Articles 131, 146(1)(b), 147 and 273 of the EU VAT Directive 2006/112/EC
Article 131 (Eemption)
The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.
Article 146 (Exemption)
1. Member States shall exempt the following transactions:
(b) the supply of goods dispatched or transported to a destination outside the Community by or on behalf of a customer not established within their respective
territory, with the exception of goods transported by the customer himself for the equipping, fuelling and provisioning of pleasure boats and private aircraft or any other means of transport for private use;
Article 147 (Exemption)
1. Where the supply of goods referred to in point (b) of Article 146(1) relates to goods to be carried in the personal luggage of travellers, the exemption shall apply only if the following conditions are met:
- (a) the traveller is not established within the Community;
- (b) the goods are transported out of the Community before the end of the third month following that in which the supply takes place;
- (c) the total value of the supply, including VAT, is more than EUR 175 or the equivalent in national currency, fixed annually by applying the conversion rate obtaining on the first working day of October with effect from 1 January of the following year. However, Member States may exempt a supply with a total value of less than the amount specified in point (c) of the first subparagraph.
2. For the purposes of paragraph 1, “a traveller who is not established within the Community” shall mean a traveller whose permanent address or habitual residence is not located within the Community. In that case “permanent address or habitual residence” means the place entered as such in a passport, identity card or other document recognised as an identity document by the Member State within whose territory the supply takes place.
Proof of exportation shall be furnished by means of the invoice or other document in lieu thereof, endorsed by the customs office of exit from the Community.
Each Member State shall send to the Commission specimens of the stamps it uses for the endorsement referred to in the second subparagraph. The Commission shall forward that information to the tax authorities of the other Member States.
Article 273 (Misc. provisions)
Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.
Facts
- Mr Pieńkowski, a trader subject to VAT, is engaged in the business of selling, inter alia, telecommunications equipment and uses a cash register to register turnover and the amount of tax payable. In the course of his economic activity, Mr Pieńkowski sells goods to, amongst others, travellers resident outside the territory of the European Union.
- The Urzędu Skarbowego w Białej Podlaskiej (Tax Authorities of Biała Podlaska, Poland) notified Mr Pieńkowski that he qualified as a ‘vendor’ for the purposes of Article 127(1) of the Law on VAT. The same authorities also found Mr Pieńkowski’s VAT returns to show his turnover as PLN 283 695 (approximately EUR 68 288) for the tax year 2009 and PLN 238 429 (approximately EUR 57 392) for the tax year 2010. Furthermore, the tax authorities found that Mr Pieńkowski had not supplied any information to show that he had concluded a VAT refund agreement with an authorised person but that he had made tax refunds to travellers personally, or through an employee.
- In those circumstances, the tax authorities of Biała Podlaska found that the level of Mr Pieńkowski’s turnover meant that he was not permitted to make VAT refunds to travellers personally or through an employee, or to apply a zero VAT rate to them for the tax years 2010 and 2011.
- Mr Pieńkowski challenged that decision before the Wojewódzki Sąd Administracyjny w Lublinie (Regional Administrative Court, Lublin, Poland).
- Relying on the provisions governing the procedure for refunding tax to travellers, contained in Articles 126 to 129 of the Law on VAT and in Article 131, Article 146(1) and Articles 147 and 273 of the VAT Directive, the Wojewódzki Sąd Administracyjny w Lublinie (Regional Administrative Court, Lublin) found that, in the light of those provisions, Mr Pieńkowski was wrong to claim that the provisions of the Law on VAT were incompatible with the VAT Directive in so far as they made the option for a vendor to refund tax to travellers subject to fulfilment of the requirement that it attain a turnover greater than PLN 400 000 (approximately EUR 96 284) for the preceding tax year.
- The Wojewódzki Sąd Administracyjny w Lublinie (Regional Administrative Court, Lublin) found that the minimum level of turnover thus set was not merely informational or formal in nature, but rather that it constituted a substantive condition on which the option for the vendor to refund the tax directly depended in principle. That court therefore held, contrary to Mr Pieńkowski’s argument, that the threshold of PLN 400 000 (approximately EUR 96 284) could not be described as an ‘administrative barrier’ to the application of a zero VAT rate.
- Mr Pieńkowski appealed on a point of law to the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) submitting, in particular, that the provisions of the Law on VAT were incompatible with the provisions of the VAT Directive and with the principles of proportionality and fiscal neutrality.
- The referring court points out that, unlike Article 127(6) of the Law on VAT, the provisions of the VAT Directive do not require a taxable person to have attained a certain turnover threshold during the preceding tax year in order to apply the VAT exemption to goods carried in the personal luggage of travellers.
- In particular, it would not appear that Article 131 of the VAT Directive can form the basis for the imposition of the condition laid down in Article 127(6) of the Law on VAT.
- The referring court also notes that the conditions for applying the exemption, as laid down in Articles 146 and 147 of the VAT Directive, relate to consumers and not to vendors, contrary to the situation provided for in Article 127(6) of the Law on VAT.
- Furthermore, the referring court considers that, contrary to the view of the Wojewódzki Sąd Administracyjny w Lublinie (Regional Administrative Court, Lublin), the condition that a minimum level of turnover be attained in the preceding tax year cannot, in the light of the VAT Directive, be regarded as a substantive condition for the exemption, in the absence of any legal basis in the wording of Articles 146 and 147 of the VAT Directive justifying the establishment of such a condition.
- The referring court recalls, in addition, that, pursuant to Article 273 of the VAT Directive, Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion. The referring court is uncertain, however, as to whether a Member State imposing a requirement that a minimum level of turnover of PLN 400 000 (approximately EUR 96 284) be attained achieves the aims of that article.
Questions
Must Articles 146(1)(b), 147, 131 and 273 of Council of 28 November 2006 on the common system of value added tax 1 be interpreted as precluding national legislation which excludes application of the exemption to a taxable person who does not satisfy the condition relating to attainment of the relevant turnover ceiling for the previous tax year and who also has not concluded an agreement with a person authorised to refund tax to travellers?
AG Opinion
The provisions of Articles 146(1)(b), 147, 131 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, together with the principle of fiscal neutrality, should be interpreted as precluding national legislation which excludes application of the exemption to a taxable person who does not satisfy the condition relating to attainment of a minimum turnover during the preceding tax year and who has not concluded an agreement with a person authorised to refund tax to travellers.
Decision
Article 131, Article 146(1)(b) and Articles 147 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation under which, in the context of a supply of goods for export to be carried in the personal luggage of travellers, the vendor, a taxable person, must have attained a minimum level of turnover in the preceding tax year, or have concluded an agreement with a person authorised to refund VAT to travellers, where the mere failure to meet those conditions results in the definitive loss for the vendor of the exemption in relation to that supply.
Summary
Pieńkowski telecommunications equipment trader uses a register register to keep track of turnover and VAT due. Pieńkowski mainly sells to travelers who live outside the EU. The Polish tax authorities considered that Pieńkowski was not entitled to refund VAT to travelers or to apply the zero VAT rate to travelers given his low realized turnover.
Pieńkowski challenged this decision, after which the highest Polish administrative court referred questions to the ECJ for a preliminary ruling. The referring court notes that, unlike the Polish VAT Act, the VAT Directive does not prescribe a certain turnover that the taxable person must have achieved in the previous tax year in order to be able to apply the VAT exemption to goods contained in the personal luggage of travelers are taken.
According to the ECJ, a national rule is under which the taxable seller, in the context of an export supply of goods forming part of travellers’ personal luggage, must have achieved a certain turnover threshold in the previous tax year or with an economic operator who is entitled to VAT refund must have concluded is not allowed, because the mere failure to comply with these conditions results in him being definitively denied the exemption for that supply.
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